Week in Review

The Dow climbed 3.3% this week, as fears of a global trade war waned. Shares of large steel and aluminum users such as Boeing and Caterpillar soared on the news that Canada and Mexico may be exempt from tariffs. Non-Dow component and conservative blog candidate Deere & Co. rose $14.62 per share or 9.5% on the week. Despite initial discouragement that White House senior economic advisor and Wall Street favorite Gary Cohn will be leaving his post, the S&P 500 managed a gain of 3.5% and the NASDAQ by over 4%. The Dow Transport average also climbed by nearly 4%.

International tensions also behaved as rumors of possible talks between President Trump and North Korean leader Kim Jung-un circulated. And the normal negative reaction to a strong employment report was met with enthusiasm. On Friday, the Labor Department said the economy added a whopping 313,000 new jobs in February, which blew by the 222,000 estimate, led by construction, manufacturing and retail jobs. And the December and January figures were significantly revised upward. The overall unemployment rate remained at 4.1%, as the surge in jobs was offset by an 806,000 person jump in the labor force. That pushed the labor force participation rate up to 63%. Wage growth was muted, however, with average hourly earnings higher by 2.6% on an annualized basis, 0.2 percentage points below expectations, keeping inflation pressures – and interest rate hike worries – somewhat at bay.

The large positive momentum from the February correction translated into increased volatility, however. Nonetheless, there are clearly reasons for hope as the economy pushes higher and profits are on target for more good news. But not all is rosy, as growth needs to be weighed against inflation and the possibility of trade wars with Europe and China remain unclear. With ongoing uncertainty, market turbulence will continue. Conclusion: Maintain a prudent investment course in high-quality, dividend paying names in sectors such as technology, finance and consumer discretionary.